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Turkey is in an uncomfortable place. Amid a general turn away from emerging markets, fuelled by the rise of the dollar and expectations of US rate rises, the Turkish economy is, if not in investors’ crosshairs, close to the centre of concerns.

The lira is skirting seven month lows, undermined by worries about the country’s fundamentals (notably its high current account deficit), its geopolitical position (bordering Iraq and Syria, not to mention the jihadis of Isis) and more besides.

That makes the difference between what appear to be two schools of thought within the Turkish government particularly important. Continue reading »

** FT News **

* Tens of thousands flood Hong Kong streets | Crowds flock to vicinity of government headquarters to oppose Beijing’s electoral reform plans

* Manufacturing activity hits 17-month low | PMI data suggest rapid cooling of expansion Continue reading »

By Andy Rothman, Matthews Asia

China’s housing market is one of the most important parts of its economy, and also one of the most misunderstood. This sector is important because residential real estate together with construction last year accounted directly for about 10 per cent of GDP, 18 per cent of fixed-asset investment, 10 per cent of urban employment and more than 15 per cent of bank loans. It is also misunderstood because few observers appear to grasp the structure of China’s residential market. Continue reading »

A double dose of gloom from Capital Economics on Tuesday. Its proprietary EM GDP tracker – compiled from monthly data on output and spending as an advance proxy for GDP – shows growth slowing across emerging markets to its slowest pace since early last year. A separate report shows that while EM assets have suffered across the board this month, the pain has been particularly severe in Latin America and especially in Brazil.

First, here are the charts from the GDP tracker. They show growth across EMs slowing to 4.3 per cent year on year in July, down from 4.5 per cent in June. Capital says preliminary data for August suggest growth will be even slower, at 4.1 per cent. Continue reading »

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By Taras Kuzio of the University of Alberta

Petro Poroshenko, Ukraine’s president, has returned home after making emotional pleas for support to the Canadian and US legislatures, where he received sympathy and cash but no military assistance. Poroshenko faces deep-seated scepticism among western governments and experts over whether Ukraine’s leaders can overcome their differences, fight corruption and move beyond rhetoric to action in implementing long-overdue reforms. Continue reading »

The number of payments made without handling cash will have surged more than 20 per cent in the developing world in 2013, outpacing mature markets, where growth is expected to have been just 5.6 per cent, according to a new report.

Indeed, China is likely to become the world’s biggest market for non-cash transactions within five years and, while developing markets would take a little longer to surpass mature ones, that outcome also looks likely, according to the World Payments Report by Capgemini and the Royal Bank of Scotland (RBS), published this week. Continue reading »

China stepped up its efforts on Tuesday to transform doomsday scenarios for its domestic property market into merely another round of déjà vu. The central bank reinforced efforts to boost mortgage lending by banks, building on the small but significant turnaround that beyondbrics noted in mid-September.

The new policies allow buyers who already own one home but have paid off their mortgage to be considered as first-time buyers, thus qualifying for a mortgage downpayment of 30 per cent of the cost of the loan. Previously, they would have been considered as second home buyers and had to pay a downpayment of at least 60 per cent. Continue reading »

** FT News **

* Apple to sell iPhone 6 in China | US tech group secures approval to sell after assuaging security concerns

* Developing countries challenge dollar | The new currency contingency could see a rebalancing in global governance powers towards China Continue reading »

Serbia’s prime minister has criticised his country’s culture of state handouts and its bloated public sector, vowing to create an economy of opportunity rather than one dominated by “charmed individuals”.

Aleksandar Vucic, a former ultra-nationalist elected in a landslide election victory in March, spoke to beyondbrics after announcing cuts in public sector salaries and pensions. Continue reading »

By Eswar Prasad, Karim Foda, and Abhinav Rangarajan

China is making steady progress on its path to making the renminbi an international currency, as the FT writes in a Special Report, The Future of the Renminbi, published today.

See here for an Interactive graphic that traces the renminbi’s progress since 2000.

China continues to gradually open up its capital account, make offshore renminbi liquidity more easily available, and sign up more renminbi trading centers (London and Frankfurt most recently). To become a reserve currency, China also needs to let the renminbi’s value be market-determined rather than being tightly managed relative to the US dollar.

On March 16th of this year, China took another step towards freeing up its currency. The daily trading band around the renminbi’s central value relative to the U.S. dollar was widened from 1 percent to 2 per cent in either direction. The reasonable expectation had been that this would lead to faster appreciation of the currency and more volatility. Instead, the opposite happened. Was the shift to a wider trading band just a head fake? Continue reading »

Venezuela’s black market foreign exchange rate, the innombrable – or unmentionable in Spanish – broke the supersonic barrier of a 100 bolívares per dollar on Friday afternoon.

Amid the country’s deepening malaise, the fall has been a fast one: a year ago, a greenback fetched less than 40 bolívares fuertes. The fuerte – or strong in Spanish – has since become a wisp of a thing with the country’s biggest banknote – the 100 bolivar – now changing hands for a mere US dollar.

Nevertheless, Venezuelans are desperate to get hold of greenbacks to hedge against runaway inflation at 63 per cent. But due to tight controls imposed over a decade ago, the government sells a limited amount of dollars at overvalued rates ranging from 6.3 to roughly 50 bolívares, depending on the country’s multiple exchange rates. Continue reading »

The FT’s Benedict Mander examines the tricky task for Chile’s president, Michelle Bachelet, of pushing through reforms to reduce inequality, especially in education, as the economy starts to slow with lower demand for its main export, copper.

Portfolio flows to emerging markets made up some of last month’s losses in September, according to estimates by the Institute of International Finance. Its Portfolio Flows Tracker for September, published on Monday, shows that flows to EM equities fell slightly to about $8bn in the month, while flows to EM debt picked up to about $10bn.

Nevertheless, the IIF described investor behaviour as “cautious” amid changing expectations about the pace of monetary tightening in the US. Continue reading »

Economists surveyed by Brazil’s central bank kept their run of gloom unbroken on Monday, chalking up 18 consecutive weekly downward revisions of their consensus on GDP growth this year. Their view changed just one basis point, to 0.29 per cent growth from 0.3 per cent last week – almost as if they wanted to deliver one last dose of negativity before this weekend’s general election.

But if the mood among economists is resolutely gloomy, things are looking up for President Dilma Rousseff, hoping to win a second term in the election. Brazilians, it seems, have no wish to punish her for her government’s dismal record on the economy and she is once again the favourite, according to opinion polls. Continue reading »

By Jan Cienski of demosEuropa

A decade ago, Europe bound together the two halves of the continent, torn apart by war and then by long years of dysfunctional communist rule.

The case for European Union expansion was not always obvious. Some worried about annoying Russia, others felt that saddling the EU with bedraggled countries still fresh from transforming themselves into market economies would drag down western Europe.

They need not have been concerned. Continue reading »